Suroco Energy Inc.
TSX VENTURE : SRN

Suroco Energy Inc.

February 01, 2011 09:50 ET

Suroco Energy Inc. Announces 2010 Year-End Reserves With 61% Increase in Gross Proved Reserves in Colombia After Accounting for 2010 Production

CALGARY, ALBERTA--(Marketwire - Feb. 1, 2011) -

(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)

Suroco Energy Inc. (TSX VENTURE:SRN) (the "Corporation") is pleased to announce the results of the independent reserves reports effective December 31, 2010 for the Corporation (the "GLJ Report"). The Corporation's Colombian and Canadian reserves were evaluated by GLJ Petroleum Consultants of Calgary, Alberta ("GLJ") in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and in accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook.

2010 YEAR-END RESERVE HIGHLIGHTS

- Total proved reserves of approximately 1.0 million barrels (net after royalty), with a net present value (before tax and discounted at 10%) of approximately $41.5 million.

- Total proved plus probable reserves of approximately 1.6 million barrels (net after royalty), with a net present value (before tax and discounted at 10%) of approximately $62.2 million.

- Total proved, probable and possible reserves of approximately 2.7 million barrels (net after royalty), with a net present value (before tax and discounted at 10%) of $99.1 million.

- For the Corporation's Colombia properties:

-- total gross proved reserves in Colombia increased by 61% when compared with the same reserves category as at December 31, 2009 after accounting for 2010 production;

-- total gross proved plus probable reserves in Colombia increased by 43% when compared with the same reserves category as at December 31, 2009 after accounting for 2010 production; and

-- total gross proved plus probable plus possible reserves in Colombia increased by 64% when compared with the same reserves category as at December 31, 2009 after accounting for 2010 production.

2010 RESERVES

A complete filing of the Corporation's Statements of Reserves Data and Other Oil and Gas Information (form 51-101F1), Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor (form 51-101F2) and Report of Management and Directors on Oil and Gas Disclosure (form 51-101F3), is available under the Corporation's profile on SEDAR (www.sedar.com).

The following table summarizes the Corporation's oil and gas reserves as at December 31, 2010.



CONSOLIDATED SUMMARY OF OIL AND GAS RESERVES
BASED ON FORECAST PRICES AND COSTS

Corporation Reserves (1)
----------------------------------------------------
Light and Natural Gas
Medium Oil Heavy Oil Natural Gas Liquids
----------------------------------------------------
Gross Net Gross Net Gross Net Gross Net
Reserves Category MSTB MSTB MSTB MSTB MMscf MMscf Mbbl Mbbl
----------------------------------------------------------------------------
PROVED
Developed
Producing (2)(6) 689 635 - - - - - -
Developed Non-Producing
(2)(7) 64 59 - - - - - -
Undeveloped (2)(8) 358 329 - - - - - -
----------------------------------------------------
TOTAL PROVED (2) 1,111 1,023 - - - - - -
TOTAL PROBABLE (3) 606 556 - - - - - -
----------------------------------------------------
TOTAL PROVED + PROBABLE
(2)(3) 1,717 1,579
----------------------------------------------------
TOTAL POSSIBLE (4) 1,236 1,131
----------------------------------------------------

TOTAL PROVED + PROBABLE
+ POSSIBLE (2)(3)(4) 2,953 2,711 - - - - - -
----------------------------------------------------
----------------------------------------------------
See Notes to Tables below.


The following table summarizes the Corporation's net present values of future net revenue as at December 31, 2010.


CONSOLIDATED SUMMARY OF NET PRESENT VALUES
BASED ON FORECAST PRICES AND COSTS

Net Present Values of Future Net Revenue
-------------------------------------------------
Before Income Tax
Discounted at
-------------------------------------------------
0%/yr 5%/yr. 10%/yr. 15%/yr. 20%/yr.
Reserves Category $M $M $M $M $M
----------------------------------------------------------------------------
PROVED
Developed Producing (2)(6) 34,862 32,222 30,079 28,287 26,758

Developed Non-
Producing (2)(7) 3,761 3,435 3,170 2,951 2,767
Undeveloped (2)(8) 11,155 9,553 8,282 7,259 6,425
-------------------------------------------------
TOTAL PROVED (2) 49,778 45,210 41,531 38,497 35,950
TOTAL PROBABLE (3) 29,562 24,498 20,714 17,799 15,500
-------------------------------------------------
TOTAL PROVED +
PROBABLE (2)(3) 79,341 69,708 62,245 56,296 51,450
-------------------------------------------------
TOTAL POSSIBLE (4) 60,792 46,604 36,848 29,859 24,683
-------------------------------------------------
TOTAL PROVED +
PROBABLE +
POSSIBLE (2)(3)(4) 140,133 116,312 99,093 86,155 76,133
-------------------------------------------------
-------------------------------------------------

Net Present Values of Future Net Revenue
-------------------------------------------------
After Income Tax
Discounted at
-------------------------------------------------
0%/yr 5%/yr. 10%/yr. 15%/yr. 20%/yr.
Reserves Category $M $M $M $M $M
----------------------------------------------------------------------------
PROVED
Developed Producing (2)(6) 25,470 23,367 21,690 20,308 19,140

Developed Non-
Producing (2)(7) 2,581 2,334 2,136 1,973 1,839
Undeveloped (2)(8) 7,408 6,087 5,059 4,247 3,598
-------------------------------------------------
TOTAL PROVED (2) 35,458 31,788 28,885 26,528 24,577
TOTAL PROBABLE (3) 20,841 16,922 14,035 11,836 10,119
-------------------------------------------------
TOTAL PROVED +
PROBABLE (2)(3) 56,300 48,711 42,920 38,364 34,696
-------------------------------------------------
TOTAL POSSIBLE (4) 41,377 31,141 24,142 19,151 15,471
-------------------------------------------------
TOTAL PROVED +
PROBABLE +
POSSIBLE (2)(3)(4) 97,676 79,851 67,062 57,515 50,167
-------------------------------------------------
-------------------------------------------------

See Notes to Tables below.


The price forecast used in the variable dollar economics is available in the Corporation's Statements of Reserves Data and Other Oil and Gas Information (form 51-101F1) under the Corporation's profile on SEDAR (www.sedar.com) and on the GLJ website at www.gljpc.com.

The following table sets forth a reconciliation of the Corporation's reserves by product type:



CONSOLIDATED PROPERTIES RECONCILIATION OF CORPORATION GROSS RESERVES BY
PRINCIPAL PRODUCT TYPE BASED ON FORECAST PRICES AND COSTS

Light and Medium Oil
----------------------------------------------
Gross
Proved Gross Proved
Gross Gross Plus Gross Plus Probable
Proved Probable Probable Possible Plus Possible
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
-------------------------------------------------
At December 31, 2009 708 519 1,226 - -
Production (Sales) (303) - (303) - -
Acquisitions - - - - -
Dispositions - - - - -
Discoveries 220 (220) - - -
Extensions 456 (19) 437 - -
Revisions to Previous
Estimate - - -
Economic Factors - - - - -
Technical Revisions 30 326 357 - -
Improved Recovery - - - - -

------------------------------------------------
At December 31, 2010 1,111 606 1,717 - -

Heavy Oil
------------------------------------------------
Gross
Proved Gross Proved
Gross Gross Plus Gross Plus Probable
Proved Probable Probable Possible Plus Possible
(Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
-------------------------------------------------
At December 31, 2009 - - - - -
Production (Sales) - - - - -
Acquisitions - - - - -
Dispositions - - - - -
Discoveries - - - - -
Extensions - - - - -
Revisions to Previous
Estimate
Economic Factors - - - - -
Technical Revisions - - - - -
Improved Recovery - - - - -

-------------------------------------------------
At December 31, 2010 - - - - -


IMPACT OF OPERATIONAL ACTIVITIES ON RESERVES

The Corporation's activities in the Suroriente Block of Colombia during 2010 resulted in an upward adjustment in the Corporation's total gross proved plus probable reserves of 794 thousand barrels (before deduction of production in 2010). This significant increase is primarily attributable to activities in two particular producing fields and zones:

1. Cohembi N Sand - accurate surveillance of producing rates and pressures, plus a detailed fluid property study has enabled the Corporation to successfully conduct a reservoir simulation study of the pool. History matching of the 6-year production trend indicates that the Cohembi-1 well is producing from a large oil pool that does not exhibit aquifer support. Accordingly, proved and probable reserves have been assigned by GLJ using a recovery factor of 9%. Additional delineation of the pool and further reservoir engineering studies will allow the Corporation to investigate whether further improvement of this recovery factor is achievable. The large size of the pool, and the possibility of significantly improving recovery with well established recovery techniques has made the development of the Cohembi Villeta N oil pool the primary focus for Suroriente in 2011. This process is underway with the first appraisal well, Cohembi-2 recently being spudded. See the Corporation's January 28, 2011 press release for more information about the Cohembi-2 well.

2. Pinuna U Sand - Production performance of the Pinuna 5 well, and drilling and evaluation of Pinuna-2 and Pinuna-3 during 2010 resulted in reserve booking increases in both the northern and central areas of the Pinuna field.

RESERVES COMMITTEE

The Corporation has a reserves committee, which has a majority of independent board members, which reviews the qualifications and appointment of the independent reserve evaluators. The committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon annual evaluations by the independent qualified reserve evaluators in accordance with the COGE (Canadian Oil and Gas Evaluation) Handbook. The evaluations are conducted from the fundamental geological and engineering data. The reserves committee, chaired by Daryl Gilbert, has reviewed the reserves information and approved the reserves report.

GENERAL

The Corporation is a Calgary-based junior oil and gas company, which explores for, develops and sells crude oil, natural gas liquids and natural gas in Colombia and Western Canada. The Corporation's common shares trade on the TSX Venture Exchange under the symbol SRN.

Forward Looking Statements

Certain statements included in this press release constitute forward-looking statements under applicable securities legislation. These statements relate to future events or future performance of the Corporation. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. Forward-looking statements or information in this press release include, but are not limited to, the characteristics of the Corporation's oil and natural gas properties, reserve quantities and the discounted present value of future net cash flows from such reserves, net revenue, capital expenditures, exploration plans and development plans. In addition, this press release may contain forward-looking statements attributed to third party industry sources. Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements or information prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated, or expected.

Although the Corporation believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Corporation cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither the Corporation nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.

The Corporation does not intend and does not assume any obligation, to update these forward-looking statements or information to reflect new information, subsequent events or otherwise, expect as required by law. New factors emerge from time to time, and it is not possible for management of the Corporation to predict all of these factors and to assess in advance the impact of each such factor on the Corporation's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement or information. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

See the Corporation's Statements of Reserves Data and Other Oil and Gas Information (form 51-101F1) under the Corporation's profile on SEDAR (www.sedar.com) for more information on the assumptions and risks contained in the forward looking statements contained herein and in the GLJ Report.

Statements relating to "reserves" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitable in the future. There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Corporation. The reserve data included herein represents estimates only. In general, estimates of economically recoverable oil and natural gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results. All such estimates are to some degree speculative and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of properties and classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary substantially. The actual production, revenues, taxes and development and operating expenditures of the Corporation with respect to these reserves will vary from such estimates, and such variances could be material.

Estimates with respect to proved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result in variations, which may be substantial, in the estimated reserves.

Consistent with the securities disclosure legislation and policies of Canada, the Corporation has used forecast prices and costs in calculating reserve quantities included herein. Actual future net cash flows also will be affected by other factors such as actual production levels, supply and demand for oil and natural gas, curtailments or increases in consumption by oil and natural gas purchasers, changes in governmental regulation or taxation and the impact of inflation on costs.

All evaluations of future revenue are after the deduction of future income tax expenses, unless otherwise noted in the tables, royalties, development costs, production costs and well abandonment costs but before consideration of indirect costs such as administrative, overhead and other miscellaneous expenses. The estimated future net revenue contained in the tables above does not necessarily represent the fair market value of the Corporation's reserves. There is no assurance that the forecast price and cost assumptions contained in the GLJ Report will be attained and variances could be material. Other assumptions and qualifications relating to costs and other matters are included in the GLJ Report. The recovery and reserves estimates on the Corporation's properties described herein are estimates only. The actual reserves on the Corporation's properties may be greater or less than those calculated.

Notes to Tables

1. "Gross Reserves" are the Corporation's working interest (operating or non-operating) share before deducting of royalties and without including any royalty interests of the Corporation. "Net Reserves" are the Corporation's working interest (operating or non-operating) share after deduction of royalty obligations, plus the Corporation's royalty interests in reserves.

2. "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

3. "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

4. "Possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.

5. "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.

6. "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be
known with reasonable certainty.

7. "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.

8. "Undeveloped" reserves are those reserves expected to be recovered from know accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

Some values in the tables set forth above may not add due to rounding.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Suroco Energy Inc.
    Alastair Hill
    President and Chief Executive Officer
    (403) 232-6784
    (403) 232-6747 (FAX)
    or
    Suroco Energy Inc.
    Travis Doupe
    VP Finance and Chief Financial Officer
    (403) 232-6784
    (403) 232-6747 (FAX)
    www.suroco.com